LONDON: The oil market will move into a significant supply surplus in 2027 after recovering from the closure of the Strait of Hormuz, the International Energy Agency said in its monthly oil market report on Wednesday.
The US has announced an interim agreement to end the Iran war, which includes Iran reopening the strait and the US lifting its naval blockade of Iran, potentially bringing an end to the largest oil supply disruption in history.
The war is estimated to have blocked more than 14 million barrels per day of Middle East oil output, according to the IEA.
The oil market will then fall into a significant supply surplus next year, the IEA said in its first look at 2027, as supply is set to surge by 8 million bpd while demand rises by 2 million bpd.
A large supply surplus in 2027 could “provide a welcome respite to the market and an opportunity to replenish depleted inventories, or to build new strategic reserves, as countries review their energy strategies and policies in response to the crisis,” the IEA said.
The IEA forecasts imply that supply will come in around 920,000 bpd below total demand in 2026, according to Reuters’ calculations.
The IEA’s 2027 forecasts imply that supply will outweigh demand by 5.05 million bpd next year, as demand growth is overshadowed by supply ramping up as Middle East barrels return.
That is larger than the 2026 that IEA had previously forecast, which in its November 2025 report it pinned at 4.09 million bpd.
However, oil inventories could plunge further to historic lows before the market balance is able to shift to a surplus toward the end of this year, the IEA said.
Prices
Oil prices held steady near a three-month low on Wednesday as investors weighed the impact of a US-Iran peace deal and the IEA’s warning of a supply overhang next year against firmer near-term demand to replenish inventories.
Brent crude futures were up 30 cents, or 0.4 percent, to $79.26 a barrel by 1010 GMT, and US West Texas Intermediate gained 24 cents, or 0.3 percent, to $76.29. Both contracts hit their lowest level since early March earlier in the session. Both had fallen about 5 percent on Tuesday, fueled by hopes that a US-Iran deal would allow oil to leave the Gulf.
